Oil jumps 4% as Iran denies US talks; Brent risks $150 surge

Oil prices saw a jump of 4% on Tuesday, fueled by supply anxieties. 

This followed Iran's denial of talks with the US to de-escalate the conflict in the Gulf, which directly contradicted President Donald Trump's assertion that a resolution might be imminent.

The most-active Brent crude oil contract on the Intercontinental Exchange was at $103.47 per barrel, up 3.5% from the previous close, while the West Texas Intermediate oil was 4.1% higher at $91.78 a barrel. 

Price swings

On Monday, crude futures saw a drop of over 10%.

This decline followed an announcement by Trump that he had ordered a five-day postponement of attacks on Iran's power plants. 

He attributed this delay to "major points of agreement" reached during talks the US had with unnamed Iranian officials.

“Markets interpreted this as lowering immediate geopolitical risks to global supply—despite Iran’s denials of any talks—prompting a rush to unwind risk premiums and triggering heavy selling,” internationally renowned oil expert and economist A.F. Alhajji said in a commentary.

"By shelving the plan to strike Iranian power plants for five days, the US effectively sucked ⁠much of the 'war premium' from the oil price," said KCM Trade chief market analyst Tim Waterer.

"Today's moderate bounce is ​just the market finding its footing in the mud. Traders are aware that while the missiles are on hold, the Strait ​of Hormuz is still far from a clear waterway."

Shipments of roughly 20% of the world's oil and liquefied natural gas (LNG) via the Strait of Hormuz have nearly stopped due to the conflict.

However, two tankers heading to India successfully passed through the strait on Monday.

Meanwhile, Iran's Revolutionary Guards denied having contact with Washington, instead asserting that they had attacked US targets, and characterised Trump's comments as "worn-out psychological operations." 

Tehran itself rejected the contact claim, dismissing it as a deliberate effort to manipulate financial markets.

Persistent Middle East risks and global response

“However, this decline in prices appears purely sentiment-driven,” Alhajji said. 

“Fundamentals remain supportive of higher prices: no clear signs on the ground the war is nearing an end, ongoing supply risks in the Middle East, including lingering Hormuz issues and facility damage, and no major resolution on the ground.”

Macquarie has warned that Brent crude could reach $150 a barrel if the strait remains closed until the end of April.

In a continuation of attacks on regional energy infrastructure, a gas company office and a pressure-reduction station in Isfahan, Iran, were reportedly hit.

Additionally, according to Iran's Fars news agency, a projectile struck a gas pipeline that supplies a power station in Khorramshahr.

The US temporarily lifted sanctions on Russian and Iranian oil already en route to alleviate supply deficits.

Following this, industry sources reported that traders have proposed selling Iranian crude to Indian refineries at a higher price than ICE Brent.

Fatih Birol, Executive Director of the International Energy Agency (IEA), announced on Monday that the agency is currently consulting with Asian and European governments regarding potential additional releases of strategic reserves, should they become necessary.

According to Priyanka Sachdeva, a senior market analyst at brokerage Phillip Nova, markets are currently preparing for continued disruption at least through April. 

This situation is expected to keep upward pressure on Brent crude prices and sustain inflationary momentum.

Oil executives and energy ministers convening in Houston drew attention to the lasting effects of the US–Israel conflict with Iran on the global economy.

Conversely, US Energy Secretary Chris Wright minimized the significance of the crisis.